The Clements believe that they need six months of cash flow net of all taxes, savings, vacation,
Question:
The Clements believe that they need six months of cash flow net of all
taxes, savings, vacation, and net cash flow in an emergency fund. They are
willing to include the savings account and Nicholas's Section 401(k) plan,
because of the loan provision, in their emergency fund?
Cash account has $500 and saving account has $1000.
How much more money must Nicholas and Whitney save to meet their emergency fund objective?
Hint:
1. Determine amount of discretionary monthly cash flow. Cash outflow less discretionary costs. FICA, federal taxes, vacation/ entertainment, savings.
2. Divide by 2 to get 6 monthly of monthly discretionary cash flow
3. Reduce that amount by current cash and cash equivalents
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill